Cash is king...and queen...and a startup's key to survival. Unfortunately, cash flow is a common issue that many entrepreneurs face. Too many good companies fail simply because they can't control their cash flow and wind up running out of cash. In this presentation from Early Growth Financial Services (www.earlygrowthfinancialservices.com), we provide practical tips for better cash flow management. Topics include: - Financial projections - Cash flow modeling - Proper vendor management - Debt financing - and more!

1. Lean Cash Flow
Simple Steps to
Better Cash
Management
Ryan Johnson
VP of Operations
EGFS
#LeanCashFlow

2. “Startups face a huge burden in today’s
economy, often having to choose
between funneling resources toward
creating their goods and services or
managing the often complex
accounting, tax and financial strategy
planning necessary to run a successful
business.”
~ David Ehrenberg,
Founder and CEO
Early Growth Financial Services

3. Agenda
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What is "lean cash flow?"
Making assumptions
Cash flow modeling
Understanding your cash flow
Better cash flow management

4. Lean cash flow
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“Using the Lean Startup approach,
companies can create order not
chaos by providing tools to test a
vision continuously.”
Applying the principles of lean
cash flow, you can actively control
your cash management.
Lean is “about putting a process, a
methodology around the
development of a product.”
Lean cash flow is about putting a
methodology around cash
management.
Lean Startup Lean Cash Flow

5. Cash flow projections in an uncertain
world…
• If there’s history,
use it
• If there are
industry examples
(comps) use those
as starting
guidelines
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Focus on assumptions

6. Coming up with assumptions, when you
just don’t know…
Things to consider:
• How much more product
development before you’re
able to generate the
hockey stick?
• How will you generate
revenue?
• How quickly will you
generate revenue?
• How many people do you
need to hire?
• How much will customer
acquisition cost?
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7. Building out your model from your
assumptions
• Focus on assumptions
• Keep model flexible; model should be driven off
assumptions as much as possible
• Analyze sensitivity. Tweak assumptions – different
inputs to see how it trickles down through your model
• Level of detail should match company needs; types and
amounts of activity should drive model complexity
• Iterate
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8. Cash flow model approaches
Hybrid
• Combination of income
statement and capex
• Easier to think through
from entrepreneur’s
standpoint
• Some drawbacks – easy
to miss items that suck
up cash (e.g., working
capital)
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Full set of financial
statements
• Includes income
statement and balance
sheet projections
• Cash flow forecast
results from this
combination
• If you want to do it right
– this is how you do it!

9. Your cash flow forecast
• Update regularly (minimum monthly,
weekly if needed)
• Use actuals to continually update
projections
• Stay on top of your run rate – always
know when you’re going to run out of
cash
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10. Practical tips for better cash flow
management
• Close management of costs; question all
spending (can we do without, can we push
out?)
• Approval process in place for spending
• Right processes for hiring
• Manage accounts payable and accounts
receivable
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11. Accounts payable
• Mind your cash obligations
• Proper vendor
management
– Set up credit with vendors
– Pay with purchase order
– Get payment terms
– Push out payments for 30
days
• Pay bills on time!
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12. Accounts receivable
• System in place to collect payments in a timely
fashion
• Don’t count revenue before payments are
collected
– Receivables need to be in balance with your payments
– Don’t let receivables linger
– Try to get cash up front
– Subscription model, try to get a year upfront, or at
least quarterly – not monthly.
– Use credit card and automatic payments
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13. Consider debt financing
• Accounts receivable factoring
• Asset based financing
• Revenue based financing
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14. Closing thoughts
• Knowing how much cash you have in the bank is
baseline but it doesn’t give the full story.
– Commitments?
– Accruals?
• What does your cash flow look like over the next
6-12 months – not just today
• Need to actively monitor and manage your cash
flow – if you don’t have the time or expertise to
do this, you need to hire a professional
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15. Thank you and Q&A
Ryan Johsnon
VP of Operations
contact@earlygrowthfinancialservices.com
415-234-3437
@EarlyGrowthFS
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